FOREX-US dollar down on QE concerns; dollar/yen nears 82

Published 10/07/2010, 09:25 AM
Updated 10/07/2010, 09:28 AM

* Dollar hits 15-yr low vs yen

* Dollar/yen below Sept 15 intervention levels

* Euro climbs above $1.40, 8-1/2 month high

* Aussie dollar surges to 27-yr high, closer to parity

(Adds details, updates prices, adds quote)

NEW YORK, Oct 7 (Reuters) - The U.S. dollar's downtrend gathered pace on Thursday as it slid to a 15-year low versus the Japanese yen and an all-time low against the Swiss franc on the prospect of more money-printing by the U.S. Federal Reserve.

The Australian dollar surged to a 27-year high against its U.S. counterpart after surprisingly strong jobs data revived talk of a Reserve Bank rate hike, while broad U.S. dollar selling pushed the euro to an eight-month high.

The Bank of England and the European Central Bank both stood pat on their monetary policies on Thursday, underlining the possibility that the Fed may lead the way into more aggressive quantitative easing, which is seen knocking the dollar lower.

"The U.S. dollar fell against all the majors except the Canadian dollar as investors/traders try to get in front of the QEII wave everyone expects," said TJ Marta, chief market strategist at Marta on the Markets.

In early New York trade, the euro rose to an 8-1/2 month high of $1.4030 on electronic trading platform EBS before retreating to $1.3996, up 0.4 percent on the day. But traders reported good demand for one-month $1.4150 strikes as the market speculated on further euro gains.

The dollar was at 82.31 yen after hitting a 15-year low at 82.11 yen on trading platform EBS. Traders said there were options barriers at 82.

The euro remained bid against the dollar after comments from European Central Bank President Jean-Claude Trichet at a news conference after the rate decision which investors took as indicating the euro zone is seen ending stimulus measures sooner than the U.S., a scenario already widely expected.

"The (monetary) stance, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are fully consistent with our mandate and by construction, temporary in nature," said the ECB's Trichet.

"Trichet's comments are a backseat to what's going on," said Tim O'Sullivan, chief dealer at Forex.com in Bedminster, New Jersey. "He didn't say anything exciting or anything that would change the market's view that the euro will continue to go higher."

NERVOUSNESS

The dollar's latest decline made traders nervous, as the U.S. currency traded below levels where Tokyo intervened for the first time in six years on Sept. 15.

Direct currency intervention and talk of monetary policy loosening by central banks has ignited the issue of global economic imbalances ahead of a Group of Seven (G7) finance ministers' and central bankers' meeting this weekend, where the threat of a "currency war" is likely to dominate discussion.

"The only story out there at the moment is what the implications of another massive surge of QE means for the dollar and global imbalances," said Maurice Pomery, managing director of Strategic Alpha.

He added the meetings were unlikely to produce an agreement on how to fix trade imbalances as countries act independently to boost economic growth, which would likely push the dollar lower.

U.S. Treasury Secretary Timothy Geithner said on Wednesday that countries must persuade their emerging counterparts such as China to let their currencies rise or risk competitive depreciations that would hurt the world economy. [ID:nN06208024] The dollar fell to a fresh 8 1/2-month low of 76.906 versus a basket of currencies <.DXY> and an all-time low versus the Swiss franc of $0.9555 on trading platform EBS.

The Australian dollar surged to a 27-year high of $0.9918 on the back of surprisingly strong Australian data. Gains accelerated after the Australian currency triggered stops above its 2008 high of $0.9851 and option barriers at $0.9900.

"I wouldn't be surprised if the euro is at $1.45 at some stage next week," said Pomery at Strategic Alpha.

Sterling hit its highest since early February at $1.6019, rallying after the BoE rate decision. It recovered from a five-month low versus the euro as investors closed short positions taken out on on concerns that more monetary easing may soon be needed. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For more on currency wars, click on http://r.reuters.com/dyw27p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ (Additional reporting by Gertrude Chavez-Dreyfuss in New York and Neal Armstrong in London) (Reporting by Nick Olivari)

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